Grappling with the scale of China's power

Updated
January 18, 2014 10:31:00

Many observers are becoming increasingly worried about the power that China's government can wield using the vast financial resources at its disposal, whether it is forcing world leaders to not meet the Dalai Lama or getting them to hand over anti-China dissidents. A new Australian study has tried to quantify the influence that China can now muster as its economy grows.

BRENDAN TREMBATH: Many observers are becoming increasingly worried about the power that China's government can wield, whether it's using the vast financial resources at its disposal to force world leaders not to meet the Dalai Lama or getting them to hand over anti-China dissidents.

A new Australian study has tried to quantify the influence that China can now muster as its economy grows.

China correspondent Stephen McDonell reports from Beijing.

STEPHEN MCDONELL: Never before has there been a government with so much wealth at its disposal that can be used to shape global political outcomes in its favour. In this respect, like so many other aspects of economic governance, China has re-written the rule book.

That's the view of a new Sydney University/Lowy Institute study attempting to quantify this country's power in the current climate.

It can lean on South Africa and there's no Dalai Lama invitation for Nelson Mandela's memorial service. It can force Cambodia to hand over ethnic Uighurs in exile. Yet Beijing isn't so much achieving this with the stick - rather, the carrot.

The report's author Dr James Reilly spoke to journalists in Beijing.

He said China's leadership group, operating out of the Zhong Nan Hai compound, can direct its powerful, wealthy, state-owned companies to make crucial investments or cancel major orders as a means of forcing the hand of other countries.

JAMES REILLY: Presuming that we see slowing but continuing growth in the Chinese economy, this is still a massive amount of money that's out there. We're not closing down large, state-owned enterprises. They're not selling off state-owned banks. There's still a lot of capital that people, powerful people in Zhong Nan Hai can pick up the phone and make it move. So the ability to direct investment - say, the China Development Bank's ability to support major infrastructure projects, pipelines, roads, and railways - gives a lot of potential power. The fact that trade deals don't need to be ratified by a reluctant congress or parliament means that China can offer a lot of economic carrots, particularly to these smaller countries.

STEPHEN MCDONELL: When you look at the research, China's economic power is daunting. This is the largest trading partner for over 100 countries. It's the world's second-largest exporter and third-largest importer.

China has the world's biggest current account surplus, and holds $3.7 trillion in foreign currency reserves. You can go on and on.

The China Development Bank has assets of more than the World Bank and the Asian Development Bank combined. Its commercial banks include the world's largest bank, ICBC (Industrial and Commercial Bank of China), and three others in the top 10. Three of its oil, gas and electricity companies are in the Fortune top 10.

And all of this is owned by the Chinese government.

JAMES REILLY: So the potential to use all these resources - there's so much money and so much wealth. And the fact that unlike say in Australia or the United States, the government has so much more influence over ways in which that money is spent that it's really that that makes China in some ways a little bit different, and makes it so very important.

STEPHEN MCDONELL: Dr Reilly does warn people not to over-play Beijing's economic statecraft, and he also points out that it doesn't always work.

But to ignore the potential for a cashed-up China to throw its weight around would be to ignore the way the modern world operates.